Tax writeoff on cars, equipment boosted to $6500

Small business owners will get a bigger tax break on vehicles and other equipment under a plan designed to soothe objections to the carbon tax.

The threshold for the small business instant assets writeoff is to be increased from $5000 to $6500, widening the benefit from next year and costing the government about $200 million.

While the government announced the measure as a way to help business owners to invest in assets that “may be more energy efficient" and so reduce greenhouse gases, the tax break has been described as a way to help tradesmen buy new cars. The change is not only linked to the passage of the government’s carbon tax reforms but depends on the success of the mining tax legislation, which generates the revenue used to pay for the original writeoff.

Small business groups have attacked the government’s carbon pricing plans on the grounds small employers do not have the market power to pass their cost increases on to consumers. The government sought to assuage those concerns yesterday by insisting that small businesses would not have to count or monitor their carbon pollution and would not have to fill in any new forms. The small business instant assets writeoff is to be counted against a company’s income from July 2012. Only businesses with less than $2 million in aggregate turnover will qualify. Budget figures issued yesterday show the Treasury expects the change to cost $100 million in forgone revenue in 2013-14 and the same the following year.

Small companies in the food processing, metal forging and foundry industries will be eligible for $200 million in assistance.

The Australian Chamber of Commerce and Industry said the tax represented “big pain for little gain" and would punish small businesses that competed with overseas rivals. “The tax is a harsh blow to import- and export-competing businesses, especially small and medium businesses. Our international competitors get a free kick, of our own making," ACCI chief executive
Peter Anderson
said. “The carveouts and industry compensation packages, while sensible for those sectors, move the total tax cost around the economy, forcing other sectors like most small business to pay proportionately more."

Separately, the government is to spend $40 million on a program to give business owners information about how they can cut energy costs.

The Council of Small Business of Australia said last night it would not take a position on whether to have a carbon tax or not, but “if you have to have a tax then this will have to do".